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Can retailers do badly out of Black Friday?

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Black Friday is a recent retail phenomenon. Imported from the US and implemented by retailers two years ago, international giants like Amazon are responsible for bringing this even to the UK.

You need only to look at the sales figures to see what consumers think about the event. Last year sales topped £1 billion on Black Friday; never before has this been spent in a single day in the history of UK retail.

With statistics reaching such heights, is it actually possible for retailers to do badly out of the event?

“Black Friday can be a high-risk high-reward activity for retailers, but if appropriate planning and preparation is conducted, the rewards can be well worth it," Menzies LLP partner and head of retail Roberto Lobue said.

"There are many retailers that hate Black Friday."

Despite the figures, Black Friday is a big risk for retailers.

Without measures in place to ensure solid infrastructure and accurate predictions in terms of stock, the event can be catastrophic for retailers. Yet in today’s landscape, there is little opportunity to opt out.

"If a retailer is guilty of an offence, the company and its officers can be liable to an unlimited fine."

“It has the potential to significantly affect retailers’ margins and skew the sales data for the entire year… Retailers have to find the right balance between providing enticing discounts but not cutting margins on all product lines,” Lobue said.

“Up until a few years ago, retailers were going into Black Friday blind, but now most businesses will have at least two years of records at their disposal.

“Ensuring that the appropriate systems and staff are in place to handle demand is vital and it is advisable that contingency arrangements are considered should demand exceed expectations.”

Stock and infrastructure are important factors to consider for retailers, but more dangerous and more hidden issues can surface. 

Recent changes in legislation that some retailers are as of yet unaware of could disrupt them down the line.

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Sarah Briscall, Solicitor at Shulmans LLP, commented: “Retailers across all sectors should be aware that, aside from the usual commercial issues which may arise when sales increase there are also legal issues which can compound during a period of increased sales.

“Each channel, whether it be online, face to face in a shop, or over the telephone, imposes different obligations on a retailer to ensure compliance with the laws designed to protect consumers and it is very easy to trip up on a technicality.

"With the impact of Brexit yet to be really felt, 2016 is likely to be even bigger"

“These include requirements in respect of specific pre-contract information which must be provided to a consumer, cancellation rights and steps to confirm a contract.”

These new changes to legislation are put in place to ensure the consumer is protected, but if the retailer does not ensure they have made the conditions of the sale absolutely clear, the repercussions can be devastating for the retailer.

“If the retailer fails to provide information which relates to the consumer’s right to cancel, the consumer’s right to a refund for a period of up to two weeks after the sale will be automatically increased by up to an additional 12 months,” Briscall added.

“If a retailer is guilty of an offence, the company and its officers can be liable to an unlimited fine. This could potentially wipe out the retailers revenue over Black Friday or worse, force its closure.

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“The legislation has been in place for a little while now and the regulators and courts are unlikely to have much tolerance for lack of knowledge of the legislation when considering any non-compliance”

It is not guaranteed that Black Friday will boost a retailer’s sales to astronomical levels, and without rigorous preparation the event could prove as a significant hindrance to any business taking part.

“2014 saw fights breaking out in stores as people tried to get their hands on the best deals. In 2015, the traffic moved largely online with many websites struggling to cope with visitor volume,” Lobue commented.

“With the impact of Brexit yet to be really felt, 2016 is likely to be even bigger with the deal period more than likely to extend to over the weekend or for the entire following week.”

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Published on Tuesday 04 October by Ben Stevens

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